When Hurricane Harvey smashed into Texas on Aug. 25, it sparked a chain reaction that pushed up gasoline prices across North America, perhaps nowhere more forcefully than in Canada’s national capital region.

By Sunday, motorists in Ottawa had been treated to average price hikes of 25.1 cents per litre compared with prices a month earlier. That moved the price for ordinary unleaded fuel to $1.27 per litre, up nearly 25 per cent for the month, according to data provided by GasBuddy.com, a website that tracks energy prices across the continent.

That was roughly double the rate of increase for gas prices throughout Canada (up 12.1 per cent for the same period) and the U.S. (up 12.8 per cent).

It was also the fastest increase among Canada’s largest cities. Gas price hikes in Toronto were 16.3 per cent over the same period while increases in Montreal (12.3 per cent), Vancouver (7.7 per cent) and Edmonton (4.1 per cent) were comparatively leisurely.

The only major centre that approximated Ottawa’s experience with recent pump price inflation was Gatineau, where gasoline sold for an average of 131.1 cents per litre Sunday, up 25.9 per cent from the month before.

Motorists here could be forgiven for complaining about the apparent unfairness of it all. What’s behind it?

Perhaps the most significant factor was the temporary loss of one-third of America’s oil refining capacity, which is concentrated heavily in the Texas Gulf region.

While refining costs make up little more than one-fifth of the amount paid by Canadian motorists at the pump, these accounted for the majority of the surge in overall prices. Taxes and crude oil costs, representing nearly 70 per cent of the pump price, were relatively stable.

According to data supplied by Kent Group, a petroleum consultancy, refining costs in Canada soared 35 per cent between Aug. 24 and Aug. 31. In Ottawa and Gatineau, these jumped even faster at 40 per cent and 47 per cent respectively over the same period.

“Harvey mixed with the fact that Canada doesn’t have much in the way of competition at the refinery level so these prices are passed on in a nanosecond,” petroleum industry expert Dan McTeague told Postmedia on Friday.

The fourth major component for gasoline prices is marketing costs. These jumped five cents per litre in Ottawa between Aug. 24 and Aug. 31, according to Kent Group data.

Were retailers in the capital region taking advantage of hurricane damage to bump up earnings? While some profit-taking was undoubtedly taking place, there’s little question that shortages in the supply system were having an impact.

“We do have a very, very tight, finite supply of gasoline, and so we’re really signalling to the Americans who are probably going to be in a bit of shortage after this long weekend, that we don’t have spare gasoline,” McTeague said. “That’s why prices have risen as dramatically as they have,” he added.

Canada imports a significant portion of its gasoline from the U.S.

Motorists here can likely expect elevated gasoline prices for weeks to come. While some of the refining capacity in Texas is already starting to come back on stream, IHS Markit, a London consulting group, noted on Friday that there’s considerable uncertainty about the state of the eight shuttered refineries in Houston. Collectively, these account for 15 per cent of U.S. refining capacity.

While this seems manageable, there are knock-on effects, including in Canada. That’s because U.S. energy firms are seeking to make up lost gasoline supplies from elsewhere, thus bidding up prices generally.

GasBuddy.com data shows gasoline prices along the U.S. East Coast surged between 15 and 24 per cent month over month in a line from Miami to New York. On the West Coast, prices climbed little more than five per cent in Seattle and San Francisco.

This mirrors the high-low pricing patterns in Canada from East to West.The East Coast depends heavily on pipelines and tankers fed by the Texas Gulf area.

Economists at the TD Bank predict prices in Canada could reach a three-year high, which would mean Ottawa motorists could soon be paying more than $1.40 per litre.

The all-time high for the capital region, according to GasBuddy.com, was 140.6 cents per litre, reached on Sept. 15, 2008.

That was days before the onset of the global economic crisis, which pushed prices all the way down to 67.5 cents per litre by year-end 2008.

We are unlikely to see anything approaching those kinds of plummeting prices this time around. Hurricane Harvey is natural disaster, which means prices will likely retreat to previous levels as soon as the refineries begin humming again.

This Week's Flyers

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.